Is it Time to Refinance?

Could there ever be a better time to refinance your mortgage? The national average for a 30 year fixed rate mortgage was 3.57% at the end of July, according to Bankrate.com. The average rate on a 15-year fixed mortgage was under 3%. If inflation returns to the historic average of 4%, the net interest cost on a home mortgage, at these rates, is negative. However, this doesn’t mean you should necessarily run out and refinance your mortgage.

Certainly one of the best reasons to refinance is to get a lower interest rate. The Bureau of Economic Analysis reported the average rate on an outstanding mortgage in 2010 was 5.9%. Refinancing to a rate under 4% would be a huge savings. However, to get these low rates you need to have a good credit score. Most lenders price their rates on a sliding scale based on credit scores. To get the best rates, your credit score should be 720 or higher. Scores below 720 won’t qualify for the best rates. If your credit score is below 620 you may not even be able to qualify for a mortgage at any rate.

Your new low fixed rate mortgage will need to be low enough to offset the costs of refinancing. Mortgage professionals generally estimate the refinancing costs at 3-6% of the loan amount. Make sure you plan to stay in your home long enough for the lower interest rate to pay off. You’ll need to calculate a break even date and feel confident you will stay in the house long enough. If it takes 2 years to break even and you’re not sure you will stay in the house that long, don’t bother.

Interest rates are extremely attractive for borrowers, and present a wonderful opportunity to save thousands of dollars of interest over the life of your mortgage. Before you rush off to refinance, make sure you’ll qualify for the best rates and that you will be in the home long enough to benefit.

Will Your Money Last Through Retirement?

No one wants to run out of money. But without goals and a solid plan, how can you know for sure whether you’re on the right track?

Will I be able to maintain my current lifestyle?

What will my monthly income be in retirement?

Can I protect my hard-earned savings and still have the income I want?